On Monday, Stifel has increased its price target for ResMed (NYSE:RMD), a company specializing in medical equipment for treating sleep disorders, to $224.00, up from the previous target of $215.00. The firm has also reaffirmed its Buy rating for the company's stock.
The adjustment comes in response to the anticipated completion of the SURMOUNT-OSA trial conducted by Eli Lilly (NYSE:LLY), which is focused on the treatment of obstructive sleep apnea (OSA) in patients with obesity. The trial was expected to conclude in March.
A meta-analysis of bariatric surgery and OSA trials indicated that significant reductions in body mass index (BMI) were associated with even larger reductions in the apnea-hypopnea index (AHI), a measure of sleep apnea severity. Although expectations for weight loss and AHI reduction from the SURMOUNT-OSA are somewhat lower, the trial's findings are still projected to have an impact on ResMed's market.
The most crucial outcome for ResMed, according to Stifel, is the proportion of patients who achieve OSA remission. The analyst firm anticipates that about 50-60% of patients could reach remission in the SURMOUNT-OSA trial, based on the results of the meta-analysis. This figure is slightly less optimistic than the 60-70% previously assumed in Stifel's analysis of GLP-1 therapies.
Stifel also updated its forecast for the potential impact of GLP-1 therapies on ResMed's revenue growth. The firm now expects that GLP-1 treatments could pose a 1.0% headwind to the company's revenue growth through 2027, compared to the previously estimated 0.8%.
The price target increase is also attributed to the expansion of peer multiples. Stifel's endorsement of ResMed's stock with a Buy rating remains unchanged, reflecting confidence in the company's performance amid evolving treatments for sleep apnea.
InvestingPro Insights
Adding to the analysis provided by Stifel, current InvestingPro data offers a deeper dive into ResMed's financial health and market performance. With a market capitalization of $29.09 billion and a robust revenue growth of 19.69% in the last twelve months as of Q2 2024, ResMed demonstrates a solid financial footing. The company's commitment to shareholders is evident through its consistent dividend increases, having raised its dividend for 12 consecutive years, which aligns with the positive sentiment expressed by Stifel.
InvestingPro Tips highlight that analysts have recently revised their earnings upwards for the upcoming period, signaling confidence in ResMed's future performance. Additionally, the company's stock has shown a strong return over the last three months, with a 15.41% price total return, which may interest investors looking for momentum in their portfolio. For those seeking further insights and additional tips, there are 17 more InvestingPro Tips available for ResMed at https://www.investing.com/pro/RMD. Use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching your investment strategy with comprehensive analytics and expert insights.
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